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China Fund News reporter heard

On the evening of July 23, Huayi Brothers announced that the company plans to transfer 70% of the equity of Zhejiang Dongyang Mira Media Co., Ltd. (hereinafter referred to as Dongyang Mira) to Beijing Alibaba Pictures Culture Co., Ltd. (hereinafter referred to as Alibaba Pictures).

In the equity structure of Dongyang Mira, Huayi Brothers holds 70% and Feng Xiaogang holds 30%. After the completion of the above transaction, Feng Xiaogang and Alibaba Pictures will jointly hold Dongyang Mira.

More than 8 years

Dongyang Mira's valuation plummeted

Huayi Brothers announced that it plans to transfer 70% of Dongyang Mira's equity to Alibaba Pictures for RMB 350 million. After the transaction is completed, the company will no longer hold shares in Dongyang Mira.

The problem is that the price at which Huayi Brothers sold 70% of Dongyang Mira's equity was 700 million yuan less than the previous acquisition price.

On November 19, 2015, Huayi Brothers announced that the company planned to invest a total of 1.05 billion yuan to acquire 70% of the shares held by Dongyang Mira shareholders Feng Xiaogang and Lu Guoqiang.

At that time, Dongyang Mira was only established for 2 months, and its financial data was not good. As of November 19, 2015, Dongyang Mira's total assets were 13,600 yuan, total liabilities were 19,100 yuan, and owner's equity was -5,500 yuan.

On December 22, 2015, Wang Zhongjun, Chairman of Huayi Brothers, said at an investor exchange meeting: "I think this is a very valuable acquisition. It is because of my relationship with Feng Xiaogang for more than ten years and its future security and growth that I dare to buy this company (Dongyang Mira)."

In response, Feng Xiaogang and Lu Guoqiang made a five-year performance commitment to Huayi Brothers, from the date of completion of the transfer of 70% of Dongyang Mira's equity to December 31, 2020.

According to the agreement, Dongyang Mira's audited net profit after tax in 2016 will not be less than 100 million yuan, and the annual performance target from 2017 onwards is a 15% increase on the previous year's promised net profit target. If Dongyang Mira fails to meet its performance target for a certain year, Feng Xiaogang and Lu Guoqiang will make up for it in cash or other means.

However, Dongyang Mira only achieved part of its annual performance targets, resulting in Feng Xiaogang and Lu Guoqiang having to pay huge amounts of money to fill the relevant gap.

Today, Dongyang Mela has lost its "halo", which may be one of the reasons for the significant changes in its two transaction prices.

In 2023 and the first five months of 2024, Dongyang Mira's operating income was 124 million yuan and 675,500 yuan respectively, and its net profit was 37.6042 million yuan and 1.6273 million yuan respectively.

Selling holding subsidiaries to repay debts

In summary, Huayi Brothers and Alibaba Pictures signed a number of agreements this time, including the "Equity Transfer Agreement" and the "Debt Offset Agreement".

Specifically, the "Equity Transfer Agreement" is mainly about Huayi Brothers selling 70% of the equity of Dongyang Mira, while the "Credit and Debt Offset Agreement" explains why Huayi Brothers is planning to sell 70% of the equity of Dongyang Mira.

On January 23, 2019, Huayi Brothers and Alibaba Pictures signed a loan agreement, and Huayi Brothers owed Alibaba Pictures a loan principal balance of RMB 700 million. Currently, Huayi Brothers owed Alibaba Pictures a loan principal balance of RMB 350 million.

To this end, Alibaba Pictures intends to acquire 70% of the equity of Dongyang Mira held by Huayi Brothers, and sign a "Share Transfer Agreement" with Huayi Brothers, Dongyang Mira and other contracting parties.

Huayi Brothers announced that, subject to the provisions of the Equity Transfer Agreement, on the date of delivery of the company's 70% equity in Dongyang Meila, the company should offset the principal of its remaining debt to Alibaba Pictures with the equity transfer amount. After the offset, the balance of both will be zero.

That is, through the above transaction, Huayi Brothers offset part of the loans and eased the financial pressure.

Huayi Brothers announced that this transaction was a prudent decision made by the company based on its actual operating conditions, with the aim of further optimizing resource allocation and industrial structure, improving asset operation efficiency, and better supporting the advancement and implementation of its main business development strategy.

As of the close of July 23, Huayi Brothers' share price was 161 million yuan per share, with a total market value of 4.467 billion yuan.

Editor: Xiaomo

Audit: Wooden Fish

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